Storage consolidation took another step forward with Quantum announcing it was buying tape library vendor ADIC. The price is $770 million in cash or shares and the combined concern will be the largest independent provider of backup, recovery and archive products. As a result Quantum will have a much more significant presence in the branded tape product channel and a broader base of OEMs

Significantly Quantium's March quarter revenues were impacted by weaker-than-expected sales through the OEM channel and in EMEA, where branded channel revenues in Quantum's Storage Systems business were down.

Storage supplier consolidation is proceeding apace with the previous watermark being Sun's acquisition of StorageTek. Quantum makes and sells DLT and LTO format tape drives, autoloaders and libraries. It bought Certance in 2004 to gain entry to the lucrative and dominant LTO format tape products market. ADIC is the world's leading tape library vendor and counts EMC amongst its OEMs. It recentry tried but failed to buy Overland Data.

ADIC's latest results were expected to show a ten percent revenue rise compared to the year-ago quarter. Quantum's showed a 14 percent decline and a loss of $23 million, larger than last year's loss. The two companies complement each other in customer reach. ADIC has been particularly strong in the enterprise space, while Quantum’s success has been more in the volume end of the market. The combined entity will have greater critical mass in serving mid-range customers.

Quantum will nearly triple its sales force, resulting in increased global scale that will be particularly evident outside North America. Quantum will also be able to build on ADIC’s success in the government sector and in data management software. ADIC has its StorNext product here and counts Apple as a significant OEM.

Steve Duplessie, founder and senior analyst of Enterprise Strategy Group, said: "This acquisition propels Quantum into a clear top three position among the largest data protection suppliers, and makes them big enough to control their own fate. I love this deal."

The tape market is in a controlled decline as costs for storing data on tape fall due to capacity increases and disk-to-disk backup takes over that portion of the market focused on fast backup and restore of operational market. Tape's future as the cheapest and most secure long-term backup medium is secure though.

It has been clear that tape product-based companies can only grow significantly by taking over their competitors. Customers are very cautious and new tape formats won't persuade them to drop existing tape technologies. The LTO format has become the leading mid-range tape format and other formats, such as Quantum's DLT, have lost market share.

Quantum is solidifying its position as an LTO tape storage product vendor and strengthening its branded product and OEM sales with the acquisition.

Cost savings of $45 million are expected in the first year of combined operations. Savings will come from merged operations, manufacturing efficiences and savings in R&D spending as well as operational efficiencies.

Quantum boss Rick Belluzzo, chairman and CEO, remains as head of the enlarged Quantum. That means ADIC chairman and CEO Peter van Oppen moves on.

Why did van Oppen sell out? He got a 50 percent premium over the current ADIC share trading price so no doubt he walks away with enough cash to afford a trip to Florida once a year. Perhaps his heart is no longer in it. The Overland takeover attempt almost had an air of going through the motions about it.

There is some significant product overlap in the disk-to-disk (D2D) product space, in LTO autoloaders and libraries. Product consolidation should be expected in the LTO product space and in the D2D area.

The deal is expected to close in three to four months, given ADIC shareholder approval.